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ACCT5001 S1 2010

Self-Study Solutions

Week 7

ACCT5001 S1 2010

Self-Study Solutions

Week 7

Ch.12: BE12.5, BE12.6 Ch. 6: Q3, Q5, E6.5, E6.11, PSA6.4, PSA6.8

BRIEF EXERCISE 12.6

BRIEF EXERCISE 12.5

The GST paid on each ice cream purchased is $0.15 ($1.65 11). The shopkeeper sold 16 and so can claim a credit from the taxation authority for $2.40 (16 x $0.15).

General Journal Computer Retailer Ltd $ Account Titles and Explanation Debit $ Credit

General Journal $ Account Titles and Explanation Debit $ Credit

Inventory GST Paid Accounts Payable (To record purchase of 10 computers @$1540 each from Parts Inc. GST incl.)

14 000 1 400 15 400 Inventory GST Paid Accounts Payable/cash (To record the purchase of 20 ice creams @ $1.65 each GST incl.) 28 600 2 600 26 000 30.00 3.00 33.00

Accounts Receivable GST Collected Sales (To record sales of 10 computers @$2860 each GST incl.)

Cash GST Collected Sales (To record sale of 16 ice creams @$2.20 each GST incl.)

35.20 3.20 32.00

COGS Inventory (10 x $1,400) (To record the cost of computers sold)

14 000 14 000

COGS Inventory (To record the cost of 16 ice-creams sold)

24.00 24.00

Drawings* GST Paid (credit 15cents x 4) Inventory (To record owner taking 4 ice creams from stock)

6.60 0.60 6.00

*this is a good example of the final consumer bearing the cost of the GST- here the owners drawings include the GST paid.

ACCT5001 S1 2010 Week 7 Self-Study Solutions.doc

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ACCT5001 S1 2010 Week 7 Self-Study Solutions.doc

21/04/2010

ACCT5001 S1 2010

Self-Study Solutions

Week 7

ACCT5001 S1 2010

Self-Study Solutions

Week 7

Ch.6: Q3, Q5, E6.5, E6.11, PSA6.4, PSA6.8 3. A subsidiary ledger is a group of accounts with a common characteristic. The accounts are assembled to facilitate the accounting process by freeing the general ledger from details concerning individual balances. The advantages of using subsidiary ledgers are that they: Permit transactions affecting a single customer or single creditor to be shown in a single account, thus providing necessary up-to-date information on specific account balances. Free the general ledger of excessive details relating to inventory, accounts receivable and accounts payable. As a result, a trial balance of the general ledger does not contain potentially thousands of individual account balances. Assist in locating errors in individual accounts by reducing the number of accounts combined in one ledger and by using control accounts. Sales journal: Cash receipts journal: Purchases journal: Cash payments journal: Records entries for all sales of inventory on account. Records entries for all cash received by the business. Records entries for all purchases of inventory on account. Records entries for all cash paid. EXERCISE 6.5

Abbott Hardware

(a) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

Journal

(b)

Columns in the journal

Cash Payments Cash Receipts Cash Payments Cash Payments Cash Receipts Cash Payments Cash Payments Cash Receipts Cash Payments Cash Receipts

Other Accounts (Dr); Cash (Cr). Cash (Dr); Discount Allowed (Dr); and Accounts Receivable (Cr). Inventory (Dr); Cash (Cr). Accounts Payable (Dr); Cash (Cr); and Discount Received (Cr). Cash (Dr); Accounts Receivable (Cr) Other Accounts (Dr); Cash (Cr). Other Accounts (Dr); Cash (Cr). Cash (Dr); Other Accounts (Cr). Other Accounts (Dr); Cash (Cr). Cash (Dr); Sales (Cr); Cost of Goods Sold (Dr); and Inventory (Cr)

5.

Some advantages of each journal are given below: Sales Journal (1) (2) (3) (1) Since the sales journal employs only one column to record an Accounts Receivable debit and a Sales credit, its use reduces recording time; The credit to Sales is only posted as a batch total; and The journals use allows for dividing responsibilities between employees. Its use aids in the posting process since the totals for Cash, Discount Allowed, Accounts Receivable, and Sales are all recorded in the general ledger as batch totals; and It allows all accounts receivable credits to be posted simultaneously to the appropriate subsidiary ledger accounts.

Cash Receipts Journal

EXERCISE 6.11 Aleskia Ltd

(2)

(a) (b) (c) (d)

$261,650. Beginning balance of $200,000 plus $125,150 debit from sales journal less $63,500 credit from cash receipts journal. $48,430. Beginning balance of $45,000 plus $27,180 credit from purchases journal less $23,750 debit from cash payments journal. The column total of $125,150 in the sales journal would be posted as a credit to the Sales account and a debit to the Accounts Receivable account in the general ledger. The accounts receivable column total of $63,500 in the cash receipts journal would be posted as a credit to the Accounts Receivable account in the general ledger.

Purchases Journal The advantages are similar to those of the sales journal except that items involved are Inventory (Purchases*) debits and Accounts Payable credits. *if periodic inventory system Cash Payments Journal Similar advantages to cash receipts journal except the columns involved are different. In general, special journals: (1) (2) Allow greater division of labour because various individuals can record entries in different journals at the same time; and Reduce posting time of journals because only column totals are posted to the general ledger.

ACCT5001 S1 2010 Week 7 Self-Study Solutions.doc

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ACCT5001 S1 2010 Week 7 Self-Study Solutions.doc

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ACCT5001 S1 2010

Self-Study Solutions

Week 7

ACCT5001 S1 2010

Self-Study Solutions General Journal

Week 7

PROBLEM SET A 6.4

G14 Bouncing Balls Ltd (a), (b) & (c) Sales Journal S17 Invoice No. Post Ref Accounts Receivable Dr Sales Cr Cost of Goods Sold Dr Inventory Cr Jan. 5 Accounts Payable Ball supplies. Inventory (Returned damaged goods purchased previously on credit) 201/ 120 450 450 Date Account Titles and Explanation Ref. Debit Credit

Date

Account Debited

19 Equipment Sundry Accounts Payable Johnson Ltd

157 202/

8,250 8,250

Jan. 4 Toys 4 U 9 Mays Ltd 17 Kid Time Ltd 31 Toys 4 U

371 372 373 374

10,875 8,700 1,800 13,995 35,370 (112)/(401)

6,525 5,220 1,080 8,397 21,222 (505)/(120)


Date

(Purchased equipment on account)

Cash Receipts Journal CR15


Account Credited Ref Cash Dr Discount Allowed Dr Accounts Receivable Cr Sales Cr Other Accounts Cr Cost of Goods Sold Dr Inventory Cr

Purchases Journal P13 Inventory Dr Date Account Credited Ref Accounts Payable Cr Jan. 6 13 14 Mays Ltd 17 Toys 4 U 20 Jan. 3 Ball Supplies Ltd 8 Balls Ltd 11 Hoble 23 Ball Supplies Ltd 24 Levine 15,000 6,750 5,550 11,700 7,035 46,035 (120)/(201) Cross-footing Totals $58,383 Dr Total = $58,383 ($44,418 + $87 + $13,878) Cr Total = $58,383 ($21,375 + $23,130 + $13,878) 27 30 Kids Time Ltd 4,725 8,010 8,613 10,875 4,800 5,595 1,800 44,418 (101) 87 (716) 1,800 21,375 (112) 23,130 (401) 0 (x) 87 8,700 10,875 4,800 5,595 4,725 8,010

2,835 4,806

2,880 3,357

13,878 (505)/(120)

ACCT5001 S1 2010 Week 7 Self-Study Solutions.doc

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ACCT5001 S1 2010 Week 7 Self-Study Solutions.doc

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ACCT5001 S1 2010

Self-Study Solutions Cash Payments Journal

Week 7

ACCT5001 S1 2010

Self-Study Solutions

Week 7

PROBLEM SET A 6.8 CP15 Flower Power (b)


Cash Cr

Date

Account Debited

Ref

Other Accounts Dr

Accounts Payable Dr

Inventory Dr

Discount Received Cr

Purchases Journal 120

Jan. 4 Supplies 13 Ball Supplies Ltd 15 Salaries Expense 20 Balls Ltd 31 Salaries Expense

126 726 726

120 14,550 21,450 6,750 19,800 41,370 (x) 21,300 (201) 0 (x) 426 (416) 135 291

P1 Inventory Dr Date Account Credited 9 Gardenia Grove Pty Ltd 16 Roses Garden 21 J Able Terms 1/7, n/30 1/10, n/30 2/7, n/30 1/7, n/30 Ref Accounts Payable Cr 4,800 36,000 2880 7800 51480 (120)/(201) Feb. 6 Aussie Seed Supplies Ltd

*14,259 21,450 6,615 19,800 62,244 (101)

Cross-footing Totals = $62,670 Dr Total = $62,670 ($41,370 + $21,300) Cr Total = $62,670 ($426 + $62,244) CP1 Cash Payments Journal

*Helpful Hint: Purchased $15,000 from Ball supplies on 3 Jan. 5 Jan returned $450 damaged goods. Balance paid is $14,550 less 2% discount. Date (d) Cross-footing the special journals prior to posting the totals to the ledger accounts ensures that the total dollar debits equals the total dollar credits. Feb. 9 Supplies 12 Aussie Seed Supplies Ltd 15 Equipment 17 Gardenia Grove Pty Ltd 20 P Sims, Drawings 28 Roses Garden 126 157 306 Account Debited Ref.

Other Accounts Dr

Accounts Payable Dr

Inventory Dr

Discount Received Cr

Cash Cr.

1,200 4800 9,600 36,000 1,320 2,880 12120 (x) 43680 (201) 0 408 (405) 360 48

1,200 4,752 9,600 35,640 1,320 2,880 55392 (101)

Dr 55800 = Cr 55800

ACCT5001 S1 2010 Week 7 Self-Study Solutions.doc

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ACCT5001 S1 2010 (a), (d) & (g)

Self-Study Solutions

Week 7

ACCT5001 S1 2010

Self-Study Solutions

Week 7 No. 158

Accumulated Depreciation Equipment General Ledger Date No. 101 Explanation Ref G1 Debit Credit 240

Balance 240

Cash Date Feb. 28 28 Explanation Ref CR1 CP1 Debit 58314 55392 Credit

Feb. 28 Adjusting entry

Balance 58314 2922 Accounts Payable Date Feb. 28 28 Explanation Ref P1 CP1 43680 Debit Credit 51480 No. 201 Balance 51480 7800

Accounts Receivable Date Feb 28 28 Explanation Ref S1 CR1 Debit 31200 14400 Credit

No. 112 Balance 31200 16800

P Sims Capital Date Feb. 1 Explanation Ref CR1 Debit Credit 36,000

No. 301 Balance 36,000

Inventory Date Feb. 28 18 28 28 Explanation Ref P1 CR1 S1 CR1 Debit 51480 180 20592 5148 Credit

No. 120 Balance 51480 51300 30708 25560 P. Sims, Drawings Date Feb. 20 Explanation Ref CP1 Debit 1,320 Credit No. 306 Balance 1,320

Sales Supplies Date Feb. 9 28 Adjusting entry Explanation Ref CP1 G1 Debit 1,200 840 Credit No. 126 Date Balance 1,200 360 Feb. 28 28 Explanation Ref S1 CR1 Debit Credit 31200 7800

No. 401 Balance 31200 39000

Discount Received Equipment Date Feb. 15 Explanation Ref CP1 Debit 9,600 Credit No. 157 Date Balance 9,600 Feb. 28 Explanation Ref CP1 Debit Credit 408

No. 405 Balance 408

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ACCT5001 S1 2010 Cost of Goods Sold Date Feb. 28 28 Explanation

Self-Study Solutions

Week 7 No. 505

ACCT5001 S1 2010

Self-Study Solutions

Week 7

Ref S1 CR1

Debit 20592 5148

Credit

Balance 20592 25740 Flower Factory Ltd Date Explanation 13

Accounts Receivable Subsidiary Ledger

Ref S1 CR1

Debit 6,600

Credit 6,600

Balance 6,600 0

Discount Allowed Date Feb. 28 Explanation Ref CR1 Debit 66 Credit

No. 614 Balance 66

Feb. 3

P Babcock Supplies Expense Date Explanation Ref G1 Debit 840 Credit No. 631 Balance 840 Date Feb. 9 Feb. 28 Adjusting entry 26 Explanation Ref S1 CR1 Debit 7800 7800 Credit Balance 7800 0

D Chambers Depreciation Expense Date Explanation Ref G1 Debit 240 Credit No.711 Date Balance 240 Feb. 28 Adjusting entry Feb. 12 Explanation Ref S1 Debit 9600 Credit Balance 9600

K Dawson Date Feb. 26 Explanation Ref S1 Debit 7200 Credit Balance 7200

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ACCT5001 S1 2010

Self-Study Solutions

Week 7

ACCT5001 S1 2010 (e)

Self-Study Solutions

Week 7

Accounts Payable Subsidiary Ledger

Flower Power Trial Balance

J Able Date Feb. 21 Explanation Ref P1 Debit Credit 7800 Balance 7800

as at 28 February 2011

Debit

Credit

101 Aussie Seed Supplies Ltd Date Feb. 6 12 Explanation Ref P1 CP1 4,800 Debit Credit 4,800 Balance 4,800 0 112 120 126 157 201 Gardenia Grove Pty Ltd Date Feb. 9 17 Explanation Ref P1 CP1 36,000 Debit Credit 36,000 Balance 36,000 0 301 306 401 405 505 614 Roses Garden Date Feb. 16 28 Explanation Ref P1 CP1 2,880 Debit Credit 2,880 Balance 2,880 0

Cash Accounts Receivable Inventory Supplies Equipment Accounts Payable P. Sims, Capital P. Sims, Drawings Sales Discount Received Cost of Goods Sold Discount Allowed

$2,922 16,800 25,560 1,200 9,600 $7,800 36,000 1,320 39,000 408 25,740 66 $83,208 $83,208

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ACCT5001 S1 2010 (f)

Self-Study Solutions

Week 7

ACCT5001 S1 2010

Self-Study Solutions

Week 7

(h) Accounts Receivable Control Account Accounts Receivable Subsidiary Accounts: D Chambers K Dawson Accounts Payable Control Account Accounts Payable Subsidiary Account: J Able $7,800 $9,600 7,200 $16,800 $7,800 Debit Credit $16,800 Flower Power Adjusted Trial Balance as at 28 February 2011

101 112

Cash Accounts Receivable Inventory Supplies Equipment Accumulated Depreciation Equipment Accounts Payable P. Sims, Capital P. Sims, Drawings Sales Discount Received Cost of Goods Sold Discount Allowed Supplies Expense Depreciation Expense

$2,922 16,800 25,560 360 9,600 $240 7,800 36,000 1,320 39,000 408 25,740 66 840 240 $83,448 $83,448

(g) General Journal G1 Date Account Titles and Explanation Ref 631 126 Debit 840 840 Credit

120 126 157 158 201 301

Feb. 28 Supplies Expense Supplies (Record supplies used) 28 Depreciation Expense Accumulated Depreciation Equipment (Record depreciation expense)

306 401 405

711 158

240 240

505 614 631 711

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ACCT5001 S1 2010 (i)

Self-Study Solutions

Week 7

ACCT5001 S1 2010

Self-Study Solutions

Week 7

Flower Power Income Statement for the month ending 28 February 2011 ASSETS INCOME Sales Less Cost of Goods Sold Gross Profit OTHER INCOME Discount Received 408 13,668 OPERATING EXPENSES Administrative expenses: Supplies Expense Depreciation Expense 840 240 1,080 Non-current assets: Equipment 39,000 25,740 13,260 Current assets: Cash Accounts receivable Inventory Supplies

Flower Power Statement of Financial Position as at 28 February 2011

$2,922 16,800 25,560 360 45,642

9,600 ($240) 9,360

Less: Accumulated depreciation Total non-current assets TOTAL ASSETS

$55,002

Financial expenses: Discount Allowed PROFIT 66 12,522 LIABILITIES Current liabilities: Accounts payable Total liabilities 7,800 7,800

OWNERS EQUITY P. SIMS, Capital (36,000 + 12,522 1,320) 47,202

TOTAL LIABILITIES AND OWNERS EQUITY

$55,002

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